In a landmark development that is aimed at streamlining, boosting efficiency and which introduces next-gen technology in the financial services sector, for the first time a government-led efforts along with players from the financial sector industry are collaborating to launch a blockchain-based trade and finance platform. The banking industry is known for its insistence on paper trail. Thanks to blockchain’s distributed ledger technology, industry players will not only be able to better serve their existing customers but it will also significantly enable them to expand their footprint and serve newer, yet uncovered markets.
On Tuesday, Hong Kong’s banking regulator as well as several banks including Standard Chartered PLC and HSBC Holdings PLC stated they will jointly launch a blockchain-based trade finance platform in September 2018.
The launch of the platform will mark one of the biggest government-led, cross-bank efforts aimed at reforming the multi-billion dollar trade finance sector using blockchain’s distributed ledger technology.
The banking sector is one of the most paper-centric in the financial services industry.
This blockchain-based project aims to digitize and bring automation in the industry in order to better mitigate its inherent risks as well as augment and optimize the financing capability of the banking industry, said Howard Lee, deputy chief executive of the Hong Kong Monetary Authority (HKMA), Hong Kong’s de facto central bank and banking regulator.
“The next major milestone … is to link up with other trade platforms in other jurisdictions to further facilitate cross-border trades,” said Lee in a joint statement with the other participating companies.
According to a 2017 survey by the Asian Development Bank, the gap in the unmet global trade finance in the Asia-Pacific region stood at 40% of $1.5 trillion.
Players in the sector hope emerging technologies, including blockchain, will allow them to serve more clients while serving existing ones even better. Earlier this year in May, ING Groep NV and HSBC stated they had performed the world’s first financial transaction using a single blockchain platform called Corda which was developed by NY-based blockchain consortium R3.
The other banks involved in this Hong Kong initiative include Singapore’s DBS Group Holdings Ltd, BOC Hong Kong Holdings Ltd, Bank of East Asia Ltd, Hang Seng Bank Ltd and Australia and New Zealand Banking Group Ltd.
The technology to the blockchain-based trade finance platform will be provided by Ping An Insurance Group Co of China Ltd.